The Bank of Japan should plan an exit strategy for its policy of buying government and corporate bonds because the freeze in credit markets has eased, according to an Upper House financial committee director from the new ruling party.
"In the short term, the BOJ should buy Japanese government bonds as they do now or buy even more," Tsutomu Okubo, a Democratic Party of Japan lawmaker, said in an interview at his Tokyo office Wednesday. "In the long term, they should stop it, as there is a conflict of interest" when the bank is funding government spending, he said.
Japan's credit markets seized up after collapse last September of Lehman Brothers Holdings Inc., causing a drop in corporate bond issuance and a jump in commercial paper yields. The BOJ responded by purchasing corporate bonds from banks, buying more government debt and extending loans backed by short-term notes.